What is Privacy Compliance? Importance & Best Practices [2024]

Imagine you are close to striking an important business deal and just as you are about to shake hands, they ask you about your privacy practices. Suddenly, the strength of your privacy compliance becomes a make-or-break for your business. Like in this example, privacy compliance has become a powerful criterion that can seal or sink a business opportunity. That is why this blog helps you understand the importance and what it takes to be privacy-compliant.

The term data privacy compliance is far beyond a legal concern and has become an everyday reality to both businesses and consumers alike. It refers to an organisation’s obeyance to a regulatory framework designed for the protection of personal data/personally identifiable information, simply called data privacy laws or data protection laws. 

Depending upon your operations and geographical location, you would have to comply with one or more of the privacy regulations across the world. European Union’s General Data Protection Regulation (GDPR), California Consumer Privacy Act (CCPA), Brazil’s Lei Geral de Proteção de Dados (LGPD), and Canada’s Personal Information Protection and Electronics Document Act (PIPEDA) are a few of the many privacy laws pushing businesses to rethink how they handle personal data.

Privacy compliance involves a series of steps such as conducting data auditing, managing and recording consent, implementing data security safeguards, keeping the data collection and use of personal data to the minimum, and maintaining transparency with customers.

So, is privacy compliance uniform across the globe? Not really. The data privacy requirements vary from place to place. Take an example of a website from California and one from Europe. A website to which only the Californian law applies would not ask you for permission to use cookies but rather expects you to opt out of it.

Whereas, a website to which European or UK law applies requests your opt-in consent for non-necessary cookies. 

Therefore, what compliance measures you should take depends on the law that applies to you.

What makes privacy compliance so important that it is one of the powerful criteria to seal or sink a business deal? Here are five reasons why.

Steer clear of major penalties

Non-compliance fines differ across various laws. The supervisory authorities of GDPR can impose fines of up to 20 million Euros or 4% of the global annual turnover of the business. LinkedIn was recently fined 310 million Euros for not having a legal basis for processing. However, GDPR fines can vary significantly and may be as low as a minimal fine of 400 Euros for the same absence of a legal basis for processing.
Therefore, privacy compliance saves businesses from being hit with millions as fines.

Keep your brand’s credibility intact

When businesses are hit with non-compliance, the fallouts can be severe and swift as they trigger public backlash across digital and traditional media. This can have long-lasting impacts on the brand image significantly reducing customer trust. 

In a digital trust survey conducted among social media users from the US, it was revealed that Facebook was the least trusted Social media platform among nine others.

78% of users voted for security and 63% of users voted for legitimacy as a reason that influenced their trust towards social media. Both these are important ingredients for privacy compliance and help build customer trust and brand reputation. 

Prevent data breaches and increase operational efficiency

Complying with privacy laws not only boosts your data security practices but also helps prevent data breaches. Additionally, establishing clear internal guidelines for handling personal information and implementing automation can enhance your organisation’s operational efficiency.

Consumer autonomy

This is a true concern for many individuals as they prefer brands that give them the power to make decisions over their personal data. Privacy laws bring this into reality by granting them privacy rights such as the right to correction or deletion. Therefore, consumer autonomy is a part of privacy compliance.

Competitive advantage  

A survey by Surfshark revealed that 90% of consumers care about data privacy. If so, they would also be looking for organisations that are capable of handling their personal data responsibly. Therefore, privacy-compliant brands definitely have a competitive advantage over privacy-concerned consumers.

Many countries across the globe have started implementing privacy laws. Here are some of the prominent ones.

General Data Protection Regulation (GDPR)

The General Data Protection Regulation is the privacy regulation protecting the personal data of European residents since 2018. The law applies to all businesses that process EU personal data regardless of location. It is based on six data protection principles: lawfulness, fairness and transparency, purpose limitation, data minimisation, accuracy, storage limitation, integrity and confidentiality, and accountability. 

The main obligations of businesses under GDPR are to provide a privacy policy, obtain opt-in consent, implement cybersecurity measures, honour data subject rights, conduct data protection impact assessments, and record-keeping obligations.

California Consumer Privacy Act (CCPA)

The CCPA is the vanguard of California residents’ privacy protection. It has sparked a significant movement across the United States, prompting numerous states to adopt their own data privacy regulations such as the Virginia Consumer Data Protection Act. This legislation took effect in 2020 and was subsequently updated through the CPRA amendments in 2023. The CCPA primarily focuses on large companies, establishing its criteria based on specific numerical and monetary thresholds.

CCPA has obligations similar to those of GDPR, except for some changes like opt-out consent instead of opt-in. The ingredients of a CCPA privacy policy are also slightly different from GDPR. 

Fines under CCPA range from $2500 to $7500 per violation.

Personal Information Protection and Electronic Documents Act (PIPEDA)

The PIPEDA is Canada’s federal privacy law governing the private sector organisations that collect, use and disclose personally identifiable information (PII) for commercial purposes. The law establishes 10 fair information principles.

Consent, accuracy, transparency, data minimisation, storage limitation, etc are some of the key obligations under PIPEDA. Fines for violations can go up to 100,000 CAD.

Brazil’s Lei Geral de Proteção de Dados (LGPD)

Brazil’s data protection regulation LGPD came into effect in 2020 and is modelled after the EU GDPR. It establishes guidelines for the collection, processing, storage and transfer of personal data ensuring transparency, consent and accountability. It also grants privacy rights to Brazilians such as the right to access, correction, and erasure.

The law is enforced by the Brazilian Data Protection Authority (ANPD). The fines can range up to BRL 50 million or 2% of the annual revenue. 

Health Insurance Portability and Accountability Act (HIPAA)

HIPAA is a US federal legislation enacted in 1996 to protect patient privacy and health insurance coverage. One of the most critical components of HIPAA is the privacy rule that lays down standards for protecting health information including medical records. It applies to healthcare providers, health plans, healthcare clearinghouses, their business associates etc.

Non-compliance can result in civil and criminal penalties and corrective measures.

Legal knowledge

Privacy compliance begins with understanding what data protection laws apply to your business. For legal outsiders, it can be quite difficult to interpret legal language and jargon. When you have to comply with multiple laws in multiple languages, it can be even more challenging to find the right translated copies and then decode them.

For example, if a global brand has customers across the United States and European countries, it would have to comply with US state-specific laws and GDPR. Though GDPR is known for its stringent privacy regulations, the Federal Trade Commission (FTC) in the US has also raised concerns about data privacy making compliance even more important.

Most businesses rely on legal professionals to overcome this challenge. Some appoint Data Protection Officers (DPOs) or establish dedicated legal teams. You may also attend webinars on various laws and their implementation, subscribe to privacy newsletters, follow supervisory authorities, etc.

Resource limitations

The initial investments for implementing GDPR might be expensive, especially for SMEs. Businesses might lack enough human resources and budget for continued privacy compliance. By using automation tools and priority-based spending, you can overcome these challenges.

Lack of awareness among employees

The ignorance of employees about privacy can be a challenge for many businesses. This lack of awareness might result in accidental non-compliance. To prevent such mishandling of personal data, businesses must train their employees on the important aspects of privacy compliance. This can be practically implemented by giving out training programs on various data privacy laws, company policies and best practices.

Consent management

Proper management of consent presents a significant challenge for businesses in terms of privacy compliance. In this globalised world, a company is likely to fall under the scope of more than one privacy law. In that case, they would have to adhere to the consent requirements of all those laws. This involves geo-targeting customers and giving them a consent notice that complies with the legal requirements. Not just that, since consent is not a one-time event, users can change their preferences or withdraw consent anytime. 

Managing consent can be quite a daunting task for businesses. That’s why many well-known brands, such as Domino’s, Miniso, Jack & Jones, and Vero Moda, rely on the CookieYes consent management tool. CookieYes is a trusted CMP used by millions around the world, and it complies with IAB TCF standards while also being a certified Google Gold CMP partner.

Complying with data protection acts is a number one concern for businesses, especially with the evolving laws and increased risks of unauthorised access to customer data. Here is a comprehensive checklist on how to ensure privacy compliance.

Develop a privacy compliance program

A compliance program acts as a backbone of an organisation’s data privacy compliance. It includes A-Z of how to develop and maintain a privacy-friendly approach towards personal data. The privacy program should contain the compliance requirements of laws based on jurisdictions, the outcomes of data audits including the types of data collected, what data requires enhanced protections, suitable data protection methods, compliance measures and more.

Draft data privacy policies

The probability of having a comprehensive privacy law without transparency requirements is null. Therefore, creating and practising privacy policies/privacy notices are crucial in privacy compliance. Along with drafting clear and understandable privacy policies for customers, you must also try to develop written internal policies that guide employees in incorporating privacy practices in their role.

Leverage privacy policy generators to create and display a privacy policy for your potential and existing customers.  

Manage data transfers across jurisdictions

Privacy laws are not against cross-border transfer of personal data. They even encourage businesses to keep data in a portable format. However, when you are sharing personal data across countries, it is important to do it in accordance with the regulatory requirements.

For instance, GDPR states that international data transfers must occur either to countries deemed adequate in privacy protection by the European Union or through contractual methods such as Binding Corporate Rules or Standard Contractual Clauses. 

Ensure that all cross-border transfers are adequately secured and encrypted without any risk of unauthorised access.

Conduct risk assessments and management

Regular risk assessments help businesses to identify vulnerabilities in data practices and related risks. This includes assessing the data processing activities, current security measures, risks to unauthorised access to personal data, etc. By identifying these risks, businesses can develop effective risk management strategies to prevent data loss and data breaches including unauthorised access. Use insights from such privacy impact assessments to monitor and continue privacy compliance.

Implement consent management platforms

Consent Management Platforms are a game changer for all privacy-focused organisations. CMPs are a win-win for both customers and businesses. It makes the consent management process easier for businesses thereby giving consumers greater control over their data. While choosing a CMP, consider many factors such as customer reviews, technical support, compliance, easy integration, features, etc. CookieYes is a proven consent management tool that has been helping millions of websites for years.

Third-party compliance

Just as a blockbuster movie is the culmination of the efforts of many talented individuals, data processing by organisations is equally a dynamic and collaborative endeavour.

It involves the contributions of various entities, each fulfilling a specific role. For instance, data mapping software may use an online payment application like Stripe or PayPal to gather subscription fees from users. In this context, it is essential for the service providers/data processors—namely, the payment platform—to adhere to privacy regulations. This will protect the personal data collected by your organisation and prevent breaches.

Therefore, the privacy compliance of third parties is equally important as yours.

Establish security measures

Strengthen your digital defences to protect personal data in your database. The security safeguards must be proportional to the amount and nature of data. This means, that if you keep sensitive personal data like precise geo-location and biometric information, you should also enforce stricter data protection measures. Some of the safeguards are encryption, multi-factor authentication, role-based access control, etc.

FAQ on privacy compliance?